Asifiqbal Thakoor from Delhi: Gautam Adani is planning to pre-pay its large parts of its loans against shares (LAS) portfolio of Rs 7000-8000 crores taken at the shareholder level which are backed by share pledges, to soothe investor nerves, said people in the know. A formal decision on this is expected on Monday itself. The plan is to start reducing the LAS exposure immediately and bring it down to zero in the next 30-45 days.
Some of these facilities – taken from global banks like Credit Suisse, JP Morgan, domestic NBFCs like JM Financial, NSE -0.23 %, Mutual Funds, etc – were due in May, some were already rolled over to September of this year and some this calendar year end while some were in January 2024.
The promoter family is believed to have unwound some of their existing shareholder positions, availed of strategic finance facilities and liquidated investments to organise the funds. “The plan is within 30-45 days, the LAS portfolio will be zero,” said an official in the know.
Adani Group spokespersons were not immediately available for comment.
In some cases, the group might even offer additional share securities, if required to pacify investor concerns, one of the officials in the know mentioned.
“Our concerns are more at promoter-level uncertainty (shareholder structure, unknown leverage if any, etc.) rather than opco level,” said Varun Ahuja and Aman Aggarwal, analysts with JP Morgan.
As per their calculations, based on management guidance, there is ($1.8 billion) of promoter-level loans. “Aggregating all share pledges at their various listed entities, we arrive at $5.2 billion of pledged stake value. Also, we note that they have $5 billion of Holcim India related debt, of which $1.0-1.5 billion is margin financing, per Debtwire, while the rest is senior debt. The cement asset had over $1 billion cash as of Sep-22 and annual EBITDA of $700m-800m EBITDA vs. this senior debt.
Investors in Adani Group companies including rating agencies are worried that the pressure on governance reasons could intensify but also if banks ask the Adani companies to start part-repaying some of the near-term debt to deleverage. Bond markets panicked last week after banks like Citi, Credit Suisse stopped accepting Adani securities as collateral, sparking fears of a domino effect.
While this would be a negative on headlines and also reduction in market access, companies like
Adani Ports, NSE 3.16 %, Electricity, Transmission and Green operating companies are all free cash flow generating businesses, if there is only maintenance capex and hence should be in a position to reduce leverage when needed. “Only Adani GreenNSE -5.00 % holdco bond would still need external cap.
Adani Green Energy’s 3.375% bond maturing in August 2024 is trading at 61.27 cents on a dollar with a yield of 38.33% on Thursday at 9:30 pm India time, the data from Bloomberg shows. Similarly, Adani Port and SEZ’s bond 3.1% maturing in February 2031 is trading at 65.44 cents on a dollar with a yield of 9.33% and Adani Renewable Energy’s 4.625% bond due in October 2039 trading at 68.47 cent on a dollar with a yield of 8.10%. According to CLSA, Adani group is having foreign currency debt of $7.5.
A bond trader with an MNC firm said that if bond prices dropped by 70 cent a dollar for an offering of investment grades shows that the market is suspecting company’s may not be able to meet futures interest payment. “There is direct correlation between market capital erosion and company’s ability to raise debt or rollover of the existing debt, given the market capitalization has seen huge beating and negative news flow remain unabated, some of rating agencies may downgrade company’s immediately.
Even after the assurances to by the chiefs of State Bank of India NSE 0.20 % and Life Insurance Corporation of India, the company plans to emphasise to the markets that Indian banking exposure is less than 40% of total group debt. Within this, private banks’ exposure is below 10% of total group debt and most banks – ICICI, Axis — have indicated that they have largely financed assets with str.
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